
Concept explainers
Accounting Cycle:
Accounting cycle refers to the process of recording a business transaction in the books of accounts. This cycle begins with analysing, and recording the transactions in the journal, and concludes with the preparation of the financial statements.
To Explain: The difference between external events, and internal events.

Explanation of Solution
- External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Whereas, internal events are the events which does not involve any exchange transaction but such events affect the financial position of the company.
- Examples of external events are as follows:
-
- a) Borrowing of cash from bank
- b) Purchase of inventory
- c) Sale to a customer
- Examples of internal events are as follows:
-
- a) Accrual of salary expense
- b)
Depreciation expense - c) Expiry of prepaid rent
External events:
External events are the events which involves an exchange transaction between the two parties, which is between a company, and another entity. Examples of external transactions include borrowing of cash from bank, purchase of inventory, and sale to a customer.
To Identify: Whether the supplies purchased by a company from a local vendor would be classified as an external or internal transaction.

Answer to Problem 1RQ
The supplies purchased by a company from a local vendor would be classified as an external transaction.
Explanation of Solution
When the supplies are purchased by a company from a local vendor, it means that a transaction is being taken place between the two parties, which is between a company, and a local vendor.
Hence, the supplies purchased by a company from a local vendor would be classified as an external transaction.
Want to see more full solutions like this?
Chapter 2 Solutions
Financial Accounting
- Question 4arrow_forwardQuestin 5arrow_forwardBelle Garments manufactures customized T-shirts for football teams. The business uses a perpetual inventory system and has a highly labour-intensive production process, so it assigns manufacturing overhead based on direct labour cost. The business operates at a profit margin of 33% on sales. Belle Garments expects to incur $2,205,000 of manufacturing overhead costs and estimated direct labour costs of $3,150,000 during 2025. At the end of December 2024, Belle Line Garments reported work in process inventory of $93,980 - Job FBT 101 - $51,000 & Job FBT 102 - $42,980 The following events occurred during January 2025. i) Purchased materials on account, $388,000. The purchase attracted freight charges of $4,000 ii) Incurred manufacturing wages of $400,000 iii) Requisitioned direct materials and used direct labour in manufacturing. Job # FBT 101 FBT 102 FBT 103 FBT 104 Direct Materials $70,220 97,500 105,300 117,000 iv) Issued indirect materials to production, $30,000. Direct Labour $61,200…arrow_forward
- The trial balance for K and J Nursery, Incorporated, listed the following account balances at December 31, 2024, the end of its fiscal year: cash, $27,000; accounts receivable, $22,000; inventory, $36,000; equipment (net), $91,000; accounts payable, $25,000; salaries payable, $10,500; interest payable, $6,500; notes payable (due in 18 months), $41,000; common stock, $72,000. Determine the year-end balance in retained earnings for K and J Nursery, Incorporated.arrow_forwardWhat would be the total production engineering cost per unitarrow_forwardI want the correct answer with accounting questionarrow_forward
- Auditing: A Risk Based-Approach (MindTap Course L...AccountingISBN:9781337619455Author:Karla M Johnstone, Audrey A. Gramling, Larry E. RittenbergPublisher:Cengage LearningManagerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubAccounting Information SystemsAccountingISBN:9781337619202Author:Hall, James A.Publisher:Cengage Learning,Intermediate Accounting: Reporting And AnalysisAccountingISBN:9781337788281Author:James M. Wahlen, Jefferson P. Jones, Donald PagachPublisher:Cengage Learning




